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Optimal taxation in the macroeconomics of climate change

Engström, G. and J. Gars (2015). Annual Review of Resource Economics 7:127-150.


Climate change has in recent years moved to the forefront of the policy scene. At the same time, the research literature on macroeconomic aspects of climate change has grown and broadened significantly. In this review, we survey and discuss this literature, with special attention given to results that help shed light on important qualitative questions regarding how an optimal carbon tax should be set. The review covers topics such as spatial aspects of optimal taxes, interactions with other taxes, uncertainty, technological change, and the qualitative time profile of the optimal tax.

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Keywords: optimal carbon taxes, economic growth, integrated assessment models, climate change

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